North Americans Take $1 Billion in Oz Retail Stock

18 January 2017

Asians take a further $800m of total $6.5 billion in year to December

North American investors have splashed out nearly $1 billion on Australian retail assets, closely followed by Asian buyers with $800 million, as more than $6.5 billion worth of stock changed hands in the 2016 calendar year, according to Savills Australia’s latest research.

Private investors (25%) and Trusts (24%) were also big spenders which, together with Funds (11%) and Foreign Investors, made up 91 percent of purchases. Queensland was the favoured location with just under one third of all purchases including Mirvac’s $228m Toombul purchase, Clifford Gardens SC ($178m), The Myer Centre ($192m), and Runaway Bay SC ($160m).

South Australia recorded a low $142 million in sales following a record $861 million in 2015 which included the $400 million sale of Rundle Place and the $288m sale of the Myer Centre.

Savills National Director Retail Investments, Steven Lerche, said the $2.9 billion fall in total sales was largely attributable to a lack of opportunities to buy, to the extent that the bigger players were increasingly being forced to look at the smaller end of the market for opportunities.

"We now have four years in a row of sales averaging $7.6 billion a year, a total of $30.4 billion, while the ten year average is $5.3 billion, a total of $21.2 billion. That means that for four years in a row we have had sales 43 percent above the norm and so it is not surprising that properties for sale are in short supply and that yields continue to firm," Mr Lerche said.

He said he expected yields would continue to firm but could only go so far.

“Eventually they will taper off. The question is when do yields become so tight that private investors are tempted to sell? We may see some evidence of that soon as privates capitalise on the tight market and look at selling.

“Timing is important here because it is only going to be when they see that the market is on the cusp of turning and they are going to realise absolute full value for their assets, that they will feel comfortable making that move,” Mr Lerche said.

Mr Crabb said yields for enclosed centres now generally ranged from 4.5 to 8.25 percent with Coles’ Coburg North selling through Savills at the end of last year for $38 million at a record low yield for a neighbourhood centre of 4.94 percent.

Individual shop yields were lowest in Melbourne at 3.5 percent and Sydney (4.5 percent in CBD malls), and up to 9 percent for strips in Perth, while Large Format sector yields generally ranged from 5.5 to 9 percent, the lowest yield recorded with the sale of 283-285 Burwood road, Hawthorn for $17 million at 4 percent.